Fast-growing BRICS countries face IT challenges, says economic think tank

Much has been written about the economic potential offered by the BRICS countries: Brazil, Russia, India, China and South Africa.

And yet, despite improvements in many drivers of competitiveness, the BRICS still face important challenges to more fully adopt and leverage IT, according to the latest  Global Information Technology Report 2012: Living in a Hyperconnected World, published by the World Economic Forum.

Despite efforts over the past decade to develop information and communications technologies (ICT) infrastructure in developing economies, a new digital divide in terms of ICT impacts persists,  the Forum says.

Even for the fast-growing BRICS, an insufficient skills base and institutional weaknesses, especially in the business environment, present a number of shortcomings that stifle entrepreneurship and innovation.

It’s not unreasonable to argue that they may have something to learn about delivering successful IT projects too, as developed countries have had to do. Alternatively, they may have some insight to pass on.

When it comes to leadership in IT adoption and usage, it is the usual suspects, Sweden (1st) and Singapore (2nd) that top the rankings in leveraging information and communications technologies to boost country competitiveness.

Switzerland (5th), the Netherlands (6th), the United States (8th), Canada (9th) and the UK (10th) also show strong performances in the top 10.

It is equally perhaps no great surprise to find that ICT readiness in sub-Saharan Africa is low, with many countries showing significant lags in connectivity due to insufficient development of ICT infrastructure, which remains too costly.

Even in those countries where ICT infrastructure has been improved, the Forum suggests, ICT-driven impacts on competitiveness and well-being trail behind, resulting in a new digital divide.

China

At 51st place in the rankings, China leads the BRICS countries. Yet, the report says, “this should offer little consolation in light of the important challenges ahead that must be met to more fully adopt and leverage ICT.

“China’s institutional framework (46th) and especially its business environment (105th) present a number of shortcomings that stifle entrepreneurship and innovation, including excessive red tape and long administrative procedures, lofty taxation amounting to 64 percent of profits (124th), uncertain intellectual property protection—it is estimated that almost 80 percent of installed software in China is pirated—and limited or delayed availability of new technologies (100th).”

In terms of readiness, the country ranks only 87th in terms of its infrastructure and digital content, mainly because of its underdeveloped Internet infrastructure.

In terms of actual ICT usage, although the figures remain low in absolute terms, they should perhaps be considered in light of the sheer size of the country.

ICT usage by businesses is significant (37th). China is becoming more and more innovative and this in turn encourages further and quicker adoption of technologies. The Chinese government is already placing significant hopes in IT as a catalyst for future growth, because more traditional sources of growth are likely to dry up.

The efforts of the government in promoting and using IT are reflected in China’s strong showing in terms of government usage (33rd). For the time being, though, the overall impact of IT on the economy remains limited (79th).

India

However, contrast China’s position with India and you find that India, ranks nearly 20 places behind in 69th position.  India delivers a very mixed picture, with encouraging results in some areas and a lot of room for improvement elsewhere, notably in the political and regulatory (71st) and business and innovation environments (91st).

Extensive red tape that stands in the way of businesses and corporate tax is among the highest of all the countries analysed by the Forum. For instance, it typically takes four years and 46 procedures to enforce a contract in India. Starting a business is longer and requires more paperwork than in most countries. Other variables fare better, such as the availability of new technologies (47th), the availability of venture capital (27th), the intensity of local competition (31st), and the quality of its management schools (30th).

One of the weakest aspects of India’s performance lies in its low penetration of ICT. The country ranks 117th in terms of individual usage, with 61 mobile subscriptions for every 100 population, a relatively low figure. Only 7.5 percent of the population uses the Internet; just 6 percent of households own a PC and broadband Internet remains the privilege of a few, with less than one subscription per 100 population.

“The big story is how India is falling behind in relative terms as far as its overall measure of technology and competitiveness is concerned,” says Soumitra Dutta, Roland Berger Professor of Business and Technology at INSEAD, a co-editor of the report. “A few years ago, India was ahead of China.”

Brazil

Another member of the BRICS, Brazil, positioned in 65th place, benefits from  strong levels of business ICT usage (33rd). These, combined  fairly advanced levels of technological capacity (31st) in particular segments of its industry, allows the country to achieve one of the strongest performances of ICT-enabled innovations in the Latin American region, both in terms of new products and services (29th) and more efficient processes (34th).

However, despite these strengths, its overall business environment with burdensome procedures to create new businesses (138th) and high tax rates (130th), in addition to its high mobile phone tariffs (133rd) and poor skills availability (86th), hinder the potential of the Brazilian economy to fully benefit from IT and shift toward more knowledge-based activities (76th) at a faster pace.

That said, Brazil is now the seventh largest ICT market in the world, with £106bn spent in 2010.

World Economic Forum Global IT Report

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